Is it doom for dental associates?

on 9 October 2012

For decades, the life of an associate has been an enviable one. Earnings were high, and a short supply of associates meant all new dentists could start their working career with an expectation of a choice of jobs with good earnings. They could also look forward to becoming a practice owner in the future, often by taking over, or becoming a partner in, the practice where they work as an associate.

Due to a combination of circumstances, new associates coming into the dental profession can no longer afford to be so confident. Here is a list of factors which are impacting on the life of an associate:

1) The new NHS contract

Feedback from the NHS pilots indicates that associates are having to work harder for less pay.

2) Current pay rates

Under the current contract I have seen a decline in pay rates amongst my associate clients over recent years. Historically a genuine 50% deal has been the norm. Nowadays, 50% of a £20 UDA rate rather than 50% of the practice rate is most common.

3) Buying a practice

a) Finding a practice to buy

Fewer opportunities to 'escape' being an associate by either buying a practice, or a share of one (ie by buying into a partnership).

Corporates are hoovering up practices, particularly IDH with large practices, and other national corporates (such as Apex) , or regional groups, buying smaller practices. At the same time, there are more entrepreneurial principals who are keen to acquire larger shares in practices rather than allowing an associate to buy in.

b) Goodwill values

Goodwill values are high – because of competition between buyers for all sizes of practices, sale values continue to be high.

c) Bank funding

Bank funding is more difficult to obtain. Although it’s fair to say that banks are keen to lend to dentists (far keener than to lend to other business sectors!), there are still a couple of potential problems. Firstly most banks require a significant deposit – not many associates in my experience have tens of thousands of pounds available. Secondly loan repayment periods are often reduced, making it more difficult to repay capital out of income taxed at higher rate income tax.

4) Competition

The possible opening up of direct access to hygienists and therapists as a response to the Office of Fair Trading report on dental competition. Existing practices may well be almost forced down the route of employing therapists in order to balance costs against reduced income levels (or the requirement to carry out more work for the same contract value).

In summary, reduced pay, job competition from therapists, less opportunity to buy practices which cost more (if you can find one), and harder to borrow the money and pay it back!

I don’t like ending on a low note – so what consolation can I give to associates? Not much – other than the fact that, in these very difficult economic times, compared to other professions, on balance you are still better off than most other graduates.

Alan is a chartered accountant and partner in UNW LLP chartered accountants. He is a member of the National Association of Specialist Dental Accountants & Lawyers (NASDAL) and carries out the quarterly NASDAL goodwill survey which analyses all member client practice sales, purchases, and valuations.